Spending and Confidence Up, Joint Study Shows

September 9, 2005--Consumer and business spending continued to climb this year, giving small businesses reason to be optimistic, a recent joint study by the National Federation of Independent Business and Visa USA showed.

"The fundamentals are looking good," said William Dunkelberg, the NFIB's chief economist: "Despite the hurricane and high fuel costs, you can expect the forth quarter to be very strong."

The study, released Thursday at the Small-Business Economic Insights Series in New York, showed consumer spending on Visa-branded cards between January and August this year has already reached $774 billion, up 14% from last year. Nationally, spending in the travel and entertainment sectors is growing at 16%, according to Visa's Commercial Consumption Expenditure Index. Also up were sales among discount and drug stores and department stores, by 10.8% and 13.4%, respectively.

At the same time, businesses themselves continued to spend, the study showed. Non-payroll spending by U.S. businesses and government agencies will top $16.2 trillion this year, according to Visa estimates, and are expected to reach $17.3 trillion by 2007. Small businesses represent about 29% of that total, or $4.7 trillion, with manufacturing, retail, and wholesale trade together accounting for about half.

The gains, said Wayne Best, Visa's Senior Vice President of Businesses and Economic Analysis, indicate that discretionary spending will stay strong, and that consumers and businesses alike remain confident in the economy.

"These aren't the signs of distressed consumers," Best said. "It's an indication that people are going back to work and having money to spend."

Dovetailing with Visa's figures, the NFIB monthly index, which will be released in full on Sept. 14 , found that over half of the small business owners polled in August said the outlook was "good" for year-end sales. Just under half reported continued growth, while over 10% more firms said economic conditions were "better" than "worse."

About a quarter of the group's 600,000 members responded to the monthly survey, Dunkelberg said.